British Pound Plunges Further as Investors Flee to Yen

The British pound continued to slide against the U.S. dollar and the yen moved higher in early Asian trading on Wednesday amid the continuing fallout from the U.K.’s vote last month to leave the European Union, while China’s authorities guided the yuan to its weakest level in almost six years. The U.K. currency, also known as sterling, fell 1.4% to 1.2837 and is currently trading at the lowest level in 31 years.

It has lost more than 14% of its value since last month’s referendum, as investors fret about the impact on the U.K. economy and continuing uncertainty about the country’s political direction.

As investors continue to seek havens, the yen was once again a beneficiary. It strengthened to its firmest level since the Brexit vote, and last traded at 100.657 against the U.S. dollar, 1.4% stronger than the New York close.

“Sterling and the yen are leading the charge at the moment,” said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank in New Zealand. The move in the two currencies was “dragging everything else down with it,” he added.

The People’s Bank of China meanwhile set its daily fixing for the Chinese yuan at 6.6857 against the greenback, its weakest level since November 2010, guiding the currency 0.4% weaker against the U.S. dollar. In mainland China, where the onshore yuan can move up to 2% above or below the so-called fix, the currency was last 0.2% weaker at 6.69.

In Hong Kong, where the currency trades freely around the clock, the offshore yuan weakened 0.3% to 6.7055 against the greenback.

The weakness in the yuan fixing has recently been intensifying, said Patrick Bennett, head of macro strategy for Asia at CIBC in Hong Kong, who said Wednesday’s yuan fixing had weakened more than implied by the market. Since August last year, the PBOC has aimed to allow the yuan fix to be determined with reference basket of other currencies.

“The weakness in the currency both against the U.S. dollar and on a basket basis has accelerated,” he said. “With a current account surplus, you’d expect the Chinese yuan would be outperforming, but it’s certainly not.”

The U.S. dollar index rose 0.2% to 96.318, while gold prices rose 0.9% to $1,371.20 a troy ounce as investors sought refuge from the turmoil gripping financial markets.

Other Asian currencies also lost ground, with the Korean won weakening 0.7% to 1,165.53 against the U.S. dollar and the Malaysian ringgit depreciating 0.7% to 4.02 against the greenback. The New Zealand dollar also weakened 0.9% to 0.7083 against its U.S. counterpart.